First of all, we need to understand what the concepts of digital transformation and digital disruption actually mean.
Digital transformation is the complete process of realigning of the business and technology models with significant investments in order to effectively engage the target customers on the digital medium throughout different phases of the customer experiences. The major aim of digital transformation is to correctly address the customer needs in the best possible manners.
Digital disruption is said to occur when any of the existing industry comes across a major challenger which offers greater value to the customer base. The challenger company offerings are much superior to what the existing firms are offering. As a result, the existing firms are not able to compete with the new player in the market.
One of the best examples of digital disruption is Uber. The existing taxi industry was highly affected when Uber hit the market. Uber came to the market with taxi offerings which offer considerably greater value than an average taxi. As a result the company captured the market share very fast resulting into a disruption in the existing taxi industry. The model that Uber adopted is fundamentally unique and thus it became very tough for any other taxi company to replicate this model so easily.
The product development teams and technology teams in the legacy businesses are forced to implement a whole host of changes in terms of social interactions, value creation and business mindset due to the challenges brought in by the digital natives like Netflix and Amazon.
The Challenge: Why Digital Transformation via Disruption does not always work for Entrepreneurs
The digital transformation via disruption does not always work for the entrepreneurs due to certain reasons. Some of the major ones are discussed below:
- Change is difficult and challenging – There are several path-breaking changes that are required for bringing in digital transformation via disruption. These changes are not easily executable by the technology teams and product development teams in the business organizations. These changes which are required for digital transformation via disruption are not a welcome change for the corporate leaders who usually prefers to work within their comfort level. The resistance that comes within the organization towards the changes can grind the transformations resulting into the failure of the initiative.
- Not many Digital Agencies have the funds or the power to keep up with the constantly changing tech trends – Digital transformations are usually retarded mid-way when the operation and implementation costs are hampering the revenue and savings growth of a concerned company. According to a research report by McKinsey, most of the leading companies who aim in conducting digital transformation via transformation exhaust their resources / budget within the first three months of starting the initiative.
- Talent Gap: Digital transformations require new talent with every tech evolution – The digital transformations necessarily demand new talents which also include qualified and experienced software engineers who are well-trained in the newly evolved programming languages. Young product managers with contemporary perspectives are also needed for conducting this change. At the same time qualified data scientists, artificial intelligent experts etc. are also required for conducting digital transformation via disruption. Most of the times the companies which have taken the initiative could not find adequate talents for the execution resulting in the failure of the initiative.
- Too much focus on one aspect of the product – This has been found that many companies who take up this initiative end up focusing too much on one particular aspect instead of giving attention to all the necessary aspects equally. One of the examples being the businesses focus on Customer innovation eventually overhauls the backend / frontend / Cloud infrastructure. Ideally, the companies who have taken the initiative of digital transformation should focus on several aspects at the same time like migrating to the cloud infrastructure and at the same time conducting experimentations on mobile applications etc.
- Getting carried with the Digital Disruption process & spending too much time planning than executing a plan – There are several instances when the companies undertaking the initiative of digital disruption end up spending a lot of time in the planning and the execution is terribly slowed down. This snail's pace in the execution process has proved to be one of the major reasons of failure for the digital disruption process.
- Increased competitiveness – The companies which have undertaken the initiative experiences increased competitiveness amongst the teams which leads to lack of focus and the tendency to adopt shortcuts for quick success. The management also lacks focus on several aspects and thus the teams within the concerned company starve of the resourceful ideas eventually leading to the failure of the initiative.
The Solution: What must be done for a smooth Digital Transformation
Here is a list of tips which can help in the smooth digital transformation.
- Bringing a change in the approach – The focus should be ideally on the innovation rather than cost savings. If a company is more concerned about the cost associated in bringing in the change, then that can be an indicator that the game is soon nearing an end.
- Becoming data-driven – The majority of the successful digital organizations are completely data-driven. The digital companies should ideally push their services and products by determining the demand in the market. Determination of demand can be done by studying the data carefully. The data has the power of telling the facts clearly which would in turn help in making in right business decision.
- Embracing the cloud – It is safe to embrace the cloud in the present times and there is no risk involved. There are several big corporate companies which have been operating for years and by adopting the cloud technology they would be able to vacate a lot of cognitive space which in turn can be used foe IT functions of greater value. This would highly help the digital company to bring in the digital transformation via disruption.